What if you want to enter positions multiple times a day using a trusted cryptocurrencies trading platform, and need to keep a close eye on the smaller, narrower timeframe charts – the five-minute charts or the one-minute chart for example?

You can do this in the equities market; can you do it in
cryptocurrency? Of course, you can.

Let us make use of Coinbase to illustrate the point.

During 2017, in anticipation of market demand for this kind of
shorter-term cryptocurrency trading, Coinbase created a platform called GDAX.

GDAX is very similar to the platforms that traders use to buy and sell
more traditional financial assets. Think of it as a cross between ETrade’s
Active Trader platform (for the equities traders out there) and MetaTrader 4
(for Forex traders).

The platform allows for rapid order filling on purchases and sales of
a wide variety of cryptocurrencies (including bitcoin) and also offers a
comprehensive charting package that includes all the standard features –
different chart types, multiple time frames, on the chart order placement, all
that sort of thing.

In the interest of balance, it is worth noting that there are many
other platforms that also, offer charting facilities similar to that of GDAX,
but the latter is quickly becoming the industry standard.

So, how can you gain access to GDAX?

Again, this is a relatively simple process. First, you need to sign up
to the platform and open an account. Once you have an account in place, you
need to fund your bitcoin wallet with BTC.

Once funded, you are free to open and close positions just as you
would with any other financial trading platform.

If you expect the price of bitcoin to rise in relation to Ether, for
example, you can go long the BTCETH pair, simultaneously buying bitcoin and
selling Ether. When you want to close out the position (so, in an ideal world,
once the pair has risen by a certain amount), you sell bitcoin and buy Ether
simultaneously, returning to a net flat exposure. The profit you’ve made is
calculated by the difference between the amount of bitcoin you paid for the
Ether and the amount of bitcoin you received when you subsequently sold the
Ether you temporarily held.

Most Cryptocurrency exchanges will offer to buy and sell access
to a pretty substantial number of cryptocurrencies. Some will even provide
cross-asset pairs, meaning you can trade ICO tokens off against one another.

For now, let’s just stick with bitcoin.

There’s another way to trade bitcoin, however; one that doesn’t
necessitate you buying the underlying asset at all.

This is through bitcoin exchanges.

The best way to think of this concept is a sort of hybrid between
contracts for difference and forex. It’s similar to CFDs in the sense that you
can take a position on the asset in question (in this case, bitcoin) without
actually taking ownership of it. It’s like forex in the sense that you take a
position based on the fluctuations in valuation between a base and a quote
currency and – generally – it’s done through a platform that operates very
similar to (or, in many cases, also is) a currency trading platform.

This is why we’re referring to this method of trading bitcoin as doing
so through a bitcoin broker. It’s not technically a bitcoin broker that you are
going to be using – at least not in the vast majority of cases. Instead, it’s a
forex broker that offers bitcoin (as measured against another asset, generally
USD but also sometimes other cryptocurrencies) as a CFD.

The mechanics of the trade, of course, are almost identical to those
with which you would trade bitcoin using a bitcoin exchange. If you think
bitcoin is going to increase in value against the USD, you buy the BTCUSD pair
and close out the position when you think it’s done increasing.

Just as with the bitcoin exchange platforms, the most used method of
tracking the price fluctuations is through the use of price charts, which
practically every forex broker is going to offer you free of charge.

So, if the process is so similar, why would anyone use a forex
brokerage to trade bitcoin as opposed to a bitcoin exchange?

Well, because through a forex brokerage you can very quickly go short
on bitcoin.

Until recently, going short on bitcoin was a pretty tedious process.
Sure, you could sell once you though the price was done increasing, converting
your capital to fiat and then buying bitcoin once you believed price had
corrected to an optimal point.

Through this just described method, however, you’re not actually profiting from the decline. You can visit Rubix on Bitcointalk as well.

If you use a forex broker to short a bitcoin CFD, however, you can profit from downside action. With the help of website builders like Weebly, brokers have a presence online.

This is really the only technical distinction between the two types of
trading but, for many, it will be enough to justify foregoing the ownership of
the underlying asset and opening an account with a forex brokerage that offers
access to cryptocurrencies.

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This is where Ethereum, as stated by top Cryptocurrency Exchanges,
comes in to play.

As things stand, something like 95% of ICOs has been conducted using
the Ethereum platform. This is really for no other reason than it is the
platform most suited to the process, both in the sense that you can create a
smart contract-based DAO through the platform and create or issue tokens all in
the same place.

So how does it work?

Considering the high-level technical concepts that underpin the
system, it’s actually incredibly simple to set up, conduct or take part in an
ICO.

The process that has been used most widely to date is as follows:

A company decides it wants to conduct an ICO and, logically, decides
that it wants to do it through the Ethereum platform. Said a company needs to
do two things to give itself a chance of success:

The first is to create tokens for the issue. The second is to make
these tokens look attractive to buyers or investors.

The first part is easy.

The company uses the Ethereum platform to create what are called ERC20
standard tokens.

You can either do this at Ethereum itself, or there are numerous third-party trading platforms available that make the creation of these tokens simpler to people who aren’t familiar with Solidarity, which is the language (that is for the most part) used to code in Ethereum.

Phase 2 is more difficult. It is during this phase that you, as a
company looking to conduct an ICO must convince people that what you’re trying
to create is worth their investment in.

Or, to put that another way, and in line with our previous discussion
on what these tokens are, that the symbols which represent your company and
that the buyers receive in return for their cash are likely to increase in
value over time.

The standard way of going about this right now is through the
production of a white paper and the publishing of this white paper online as
part of a website that – pretty much invariably – details the team, the concept
and the history of the company (which is often relatively thin).

Once everything is live, you set a start and end date for the ICO,
which is basically just a crowd sale that starts and ends as defined by the
restrictions you’ve just created.

After that, you’re good to go.

So where does Ethereum come into all of this?

To buy tokens as part of the crowd sale, individuals need to send
Ether (the token used as a reward on the Ethereum blockchain, as outlined
above) to a particular Ether wallet (which is owned by the company in
question).

On setting up the ICO, the company that is raising the money will have
developed smart contracts that can register the receipt of Ether to the wallet
in question and can execute on a return transaction that sends a predefined
number of tokens (as defined by the amount of Ether sent to the wallet) to the
initial sender.

What you should pay attention to is that the only actual smart contract
that the company conducting the ICO needs to set up is the one that’s detailed
in the previous paragraph – the one that deals with the receipt and issue of
Ether and tokens respectively.

The underlying business, the operational activity, and company that
the person buying the tokens are funding can be nonexistent.

This is why the ICO market is so risky right now.

Investors must rely on white papers, which in many cases are beyond
the technical understanding of those reading, to make informed investment
decisions. There is no real regulation (as yet), and there is no obligation on
the part of the ICO company to actually execute on the strategy outlined in its
white paper. No legal obligation that is.

Of course, this hasn’t stopped people from taking part in ICOs –
nowhere near.

During the first six months of 2016 alone, technology startups raised
close to $1.3 billion

Through the above-described mechanism. Records are being broken virtually every week, with the current highest amount of capital raised (as of August 2017) being Tezos‘ huge $232 million haul mid-July. Before that, the record was held by Bancor, which raised $153 million in just three hours in June and totaling a haul that came in at $51 million more than it sought to pick up.

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All an investor looking to take part in an ICO through using a quality
Cryptocurrency exchange needs to do is to send Ether to the wallet
listed on the website of the ICO in question during the period when the crowd
sale is open.

To do this, of course, you will need Ether, so let’s talk about how to
pick some up for yourself.

Ether is, of course, different to bitcoin in the sense that it is a
different cryptocurrency and it’s resting on a separate blockchain. From a
transaction standpoint, however, it is remarkably similar. To store bitcoin,
you need a bitcoin wallet. The same is true of Ether but, in this instance,
it’s an Ether wallet you need. Similarly, just as you can open an account with
an exchange like Coinbase and by bitcoin, you can open an account with Coinbase
and buy Ether.

Coinbase also offer Ether wallets, which is one of the reasons that
the platform has become so popular over the last few years – it makes
everything incredibly easy for beginners to the space and does so in a
(relatively) secure fashion while offering clean and straightforward access to
the ICO boom.

So, let’s break this down in a simple, easy to understand transaction
flow.

Head over to an exchange like Coinbase, open an account, create an
Ether wallet and use either bitcoin that you already hold or fiat currency
(either in your online wallet or through credit card or bank account linked to
the account in question) to buy Ether over the exchange.

You’ve now got a bunch of Ether sitting in your Ether wallet.

The next step is to head on over to the website of the ICO that you
are looking to take part in and to find out the Ether address that is linked to
the crowd sale. More often than not, there will be a page dedicated to taking
part that will offer either an address in the form of letters and numbers or in
the form of a QR code.

Once you have the address or the QR code, you can use the Coinbase
platform (or the exchange/wallet of your choosing) to send Ether to the crowd
sale wallet and the wallet, in return (and as dictated by the smart contract
that’s governing the issue) will send you tokens in return.

Where do I store these tokens, we hear you say?

Remember we mentioned earlier that the company doing the issuing needs
to create ERC20 standard tokens? There’s a good reason for this. ERC20 standard
tokens are tokens that are designed to be compliant with Ether wallets and – by
proxy – can be stored in any Ether wallet.

In other words, if you’ve got an Ether wallet (the assumption is that
you have since you needed one to send the Ether to the crowd sale wallet in the
first place), then you’ve got somewhere to store your tokens.

Before we go on, let’s take stock of what’s happened so far.

You started off by getting hold of an Ether wallet and topping it up
with some Ether, either by using bitcoin in an existing wallet or by using fiat
currency to buy Ether outright.

You then sent some of your Ether to the wallet that’s associated with
the crowd sale, the address for which you found on the website of the ICO that
you are seeking to take part in.

When the sending had been verified by the Ether blockchain (i.e., when
the block that included your transaction had been mined), the smart contract
was executed, and ICO tokens were sent automatically and autonomously to your
Ether wallet.

Now, what happens?

Well, now you wait.

Just as with trading or investing in the stock market, the idea is to buy these ICO tokens low and sell them once they’ve risen in value. Then, of course, the value gained is rooted in just how much prospective buyers are willing to buy these for a while, at the same time, how much eager sellers would be willing to sell these for on an exchange. Some ICO tokens can take a while to even list on a Cryptocurrency trades (generally exchanges only contain the ones that are attracting some attention) so you may have to wait a while (say, a few weeks) before an open market price is even established.

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There is plenty of excitement surrounding Bitcoin and other cryptocurrencies, which is why there are numerous cryptocurrency exchanges in place.

You may have heard all sorts of accounts on how the path to Bitcoin is strewn with corpses of failed attempts.

While Bitcoin does
not provide the same benefits offered by cash or credit, it comes close enough
to be considered useful. You see, you do not require your identity to make any
purchases using Bitcoin. However, your transactions can be linked to making use
of smart algorithms, which are connected to your identity if you are not
careful.

What is more,
Bitcoin does not work offline either. The good news is that there is no need
for a central server in any way as it merely relies on a peer-to-peer network.
Through micropayments and green addresses, offline payments are made possible
in certain situations.

It was during 1983
when the idea to apply cryptography to cash originated with David Chaum. You
may want to think of it as a physical analogy where one would hand out pieces
of paper, stating that the note bearer may exchange their note for one dollar
once he presents it to another person whose signature is on it. If others trust
the fact that the signature on numerous pieces of paper cannot be forged, they would
happily pass these around as if they were bank notes. This is how banknotes got
its start by being passed around as promissory notes.

The same can be
done by using electronic signatures, which may result in an annoying
double-spend problem should you receive a piece of data that represents a unit
of virtual cash. One could make two or more copies and pass it to different
individuals.

A possible solution
to avoid this from happening is to make use of unique serial numbers on each
note handed out. The recipient of the bill would have to verify the signature
as authentic and get on the phone to check if the serial number has not been
used already.

This process works
just fine digitally, provided a server was set up to initiate the signing and
recordkeeping of all serial numbers.

Chaum had a good
thing going. He figured how to keep the system he used anonymously while
preventing double-spending through inventing a digital equivalent to cash
spending. Essentially, it is as if the person receiving the new note would pick
the serial number and let the other person sign it without them seeing the
serial number assigned to it. They call this a “blind signature” in
cryptography.

It is best to
choose a long, random serial number so it can be unique.

During 1988, Chaum
and two other cryptographers, Moni Naor and Amos Fiat suggested offline
electronic cash.

At first, it might
seem impossible should you try and spend the same digital coin in two different
places. How could they prevent double spend unless they were connected to the
same central entity or payment network?

The idea is to not
worry about avoiding double spending but rather pay attention to detecting it
later on when the merchant gets to connect to the bank server. This is how
people can use their credit card on a plane where there isn’t a network
connection. The actual transaction will happen later one the airline can
connect and process the transaction. Should the card be denied, then the person
would owe the bank money.

As you can see,
Chaum, Naor, and Fiat’s idea for picking up double spending happened to be an
intricate cryptographic dance.

What it managed to
achieve is that every digital coin issued would decode your identity in such a
way that no one except you can decode it. Every time a coin is spent, the
recipient would have to decipher a random subset and maintain record of it. The
decoding in itself will not be enough to allow them to establish your identity.
However, if you double spend, it will reach a point where they would have to
visit the bank to cash in their notes. That would be when the bank can
determine what actually happened and decode the identities fully.

Over the years,
many cryptographers looked at its construction and found ways to improve it in
various ways.

Regarding any cryptocurrencies used these days, you should pay attention to what prominent cryptocurrency trading platforms say.

Posted inUncategorized|Comments Off on Gain a Better Understanding of Bitcoin and Cryptocurrency Exchange Technologies

Welcome to Little
Kenadie. We are repurposing the site in order to be more centered
towards roofing and cryptocurrency exchange. Yeah, that might seem like a weird
make over, but we think that these topics can be quite important in the future.
Especially as more and more people want to have more security on their trading
platforms. So if that rings a bell with you, just come back and leave a
comment.